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The Participation Banking As a Distinctive Method and the Its Growing in the Turkish Finance Market- Period: 2007-2013

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The Participation Banking As a Distinctive Method and the Its Growing in the Turkish Finance Market- Period: 2007-2013 The Participation Banking As A Distinctive Method And The Its Growing In The Turkish Finance Market- Period: 2007-2013 Ferhat Sayım Yalova University, Economics and Administrative Sciences Faculty, Yalova- Turkey | email: [email protected] Volume 5 No 1 (2015) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2015.73 | http://emaj.pitt.edu | Abstract Financial systems and companies has become the most important reason in the weakness of world economic system. The formation and development process of the financial structure also constitutes the infrastructure of the world economic system. The path of the financial system and development has led to discuss with the financial crisis in 2008-2011. One of the argument topic in order to reduce problems caused by the conventional banking system is alternative financing systems. In Turkey, the corporations based on profit share system which are named participation based banking attention, if the alternative banking systems are considered. These banks which settle on different principles in the risk distribution of the portfolio acquired are analyzed more nowadays. Participation based banks are placed in almost every regulation related to banking terms and get their legal infrastructure more stable in the banking legislation of Turkey. This study is a 2007-2013 part of research series. We try to find out the place and the importance of participation based banking with the various sub-headings especially in Turkey. We examine the comparative review 2007-2013 data of participation banks which Total Assets, Equity Net Profit, Collected Turkish Currency and Foreign Currency Funds and Bank Loan Funds, figures for the four participation banks in Turkey. We are comparing the total figures with deposit banks for the same period. One of our primary aim in this essay, to study in the framework of the alternatives of the financial companies and options. These options could be stated as a vibrant and viable well established choice as a non-western model- different from the classical western interest based leading banking system in the globe. Moreover, that participation banking systems’ grow and increase with its resourceful bulk of transactions and shares within the financial market. In addition, we intended to delineate the basic functioning structures, rules, norms, principles, procedures, operations of that alternate banking system in the financial market. Keywords: Bank, Finance Market, Finance Sector, Participation Bank, Islamic Bank, Interest Free Banking, Alternative Banking System New articles in this journal are licensed under a Creative Commons Attribution 3.0 United States License. This journal is published by the University Library System of the University of Pittsburgh as part of its D-Scribe Digital Publishing Program, and is cosponsored by the University of Pittsburgh Press. Volume 5 No 1 (2015) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2015.73 | http://emaj.pitt.edu them look for new financial instruments and systems. For The Participation Banking As that reason, it leaded to the quest for other models, opportunities or proposals. A Distinctive Method And The The fiscal and financial-economic crises, especially in the its Growing in The Turkish European Union Member States, it may be due to of the rigidity of Maastricht Euro criteria, is deepening and Finance Market- Period: 2007- deteriorates further. So we think that it proves the need for penetrating new sort of financial innovations, techniques 2013 and tools. It is also our modest propositions that might be recorded some theoretical and practical contributions, revisions and amendments to overcome these current Ferhat Sayim troublesome critical financial problematic. One of our main aim in this paper, to study in the Introduction framework of the alternatives of the financial institutions and other options. These options could be asserted as a vibrant and practicable well established choice as a non- The set of governing principles for interest free banking in western model- different from the classical western interest Turkey is dated as the end of the year 1983. With the based dominant banking system in the world. Moreover, decree dated 16.12.1983 and numbered 83/7506, the that participation banking systems’ growth, progression and foundation of Private Finance Institutions is laid. increase with its resourceful bulk of dealings and shares within the financial market. In addition, we intended to In Turkish their former name Private Finance Institutions, delineate the basic functioning structures, rules, norms, or with the new name, Participation Banks haven’t principles, procedures, operations of the Alternate banking authorized or empowered to collect deposits but receive system in the financial market. fund through special current accounts or profit and loss participation accounts, and utilize fund through methods After that, we have applied as a descriptive, explanatory, such as production financially assist, community of profit discursive and comparative analytic methodology to and loss, financial leasing, buying and selling documents expound the matter in factor. Having provided literature against payment. Even if these institutions are have been reviews then we have concentrated on Turkey as a model permitted in Turkey since 1984, they have been limited in state in that banking system practice; at which, what kind terms of both quantity and scale (Central Bank of Republic of instruments and tools used by referring basic indicators, of Turkey, 2005). data and information related to the development, flourish and share of that sector within the sum of banking and Participation Banks are banks operating in financial sector, financial system in Turkey. supporting real economy and offering banking service. Furthermore, that participation banking system positions Participation banks gather funds from saving owners, use has been researched in the country. Thus, it has been them in industrial and trade sectors according to the interest explicated more concerns on how it can be investigated by free financing ethics and shares the profit or loss with mentioning its credits, deposits, financing formulation saving owners. The word “participation” in their name systems and commitments with the banks, customers and expresses that this type of banking is based on the opinion investors of the alternate banking system in the country’s of participation to profit and loss (The Participation Banks financial order. At last, we have attempted to make clear Association of Turkey-FAQ, 2010). and summarize the concepts, definitions, expositions, demonstrations, rules, assets, liabilities, equities etc.. by Participation banks provide as a means of transformation of giving special cultural internalizations about the saving to capital. Proportional to their advantage of organizational and operational activities of the participation working with a greater number of branches, they also give banks both similarities and differences, too; so as to draw standard banking services such as investment consulting, the attentions of the new researchers and studies in that safe deposit box, money transfer service, giving check situation. book, mediating cash proceeds etc (Battal, 2007, p. 57). At present, diversity of such services given by participation I.Participation Banking in The Literature banks is equal or similar to the standards of other banks. Banking methods of this system generally called “Islamic Currently, in this article, we are going to elaborate as the Banking” in the international literature. These banking unit of analysis, the Participation Banks, new financial operations are methods such as various kinds of project instruments. In the middle of the first quarter of 21th partnership and others based on prohibition of interest century, there has been occurred a new World Financial (Moles & Tery, 1999, p. 304). As Islamic banking is part of Crises. In fact, those crises mainly influenced the capitals the banking system of a country, its performance may of the financial centre in the West. For those countries affect the soundness and stability of the banking system which heavily affected by this economic crises, forced (Mariani; 2008, p.4). Islamic banks in general referred to Ferhat Sayım Emerging Markets Journal | P a g e |93 Volume 5 No 1 (2015) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2015.73 | http://emaj.pitt.edu the three types of. (1) Development banks, (2) Islamic loyalty and brand loyalty must be earned (Omar & Ali, banks in special purpose, (3) Islamic Commercial Banks. 2010, p. 25). Participation banks may categorized in Islamic Commercial Banks groups (Canbaş & Doğukanlı, 2007, p. 237). Therefore, the determination of the relative performance between Islamic banks, and between Islamic and Moreover, for conventional banks with Islamicbanking conventional banks will assist policy makers in devising a windows, the performance of these windows has certain strategy to improve the performance of a banking system in influence on the performance of conventional banks a country and help managers in the conventional banks that (Mariani; 2008, p.4). Islamic bank works as a trading choose to have Islamic banking windows besides concern and financial intermediary to perform interest-free conventional banking to improve bank activities purely according to principles of Sharia’h. It is a performance.(Mariani; 2008, p.4) welfare organization that promotes business and trade activities by pooling the financial resources for the sake
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